Solving the Pricing Problem for Accounting Firms
This chapter preview comes from the Double Your Accounting Firm book (Amazon)
Janice’s firm was in a rut. They were gaining new clients, but had a hard time maintaining profitability. It struck him as odd, as this 30-year-old accounting firm hadn’t changed much in their practice. They continued to have a similar size staff and good client growth, so what was causing the drop in profits?At their monthly C-level meeting, Janice asked his technology lead why, given all the improvements in their technology infrastructure, profitability was actually going down.Upon digging into the numbers, and—most critically—talking with staff, he realized one thing:Staff was incentivized to get maximum billable hours without going over budget, so they commonly skipped work or duplicated the tools that were automating their practice.Your profits ride on whether your team members are willing to sit at their desk just a bit longer. In today’s climate as a CPA, it doesn’t need to be this way. You simply can’t afford it.If Janice’s story resonates with you, you’re not alone. The idea of “billing for time” has been around for a while. In fact, the only common scenario we hear is that firms simply do not adopt useful and efficient applications because of they decrease billable time. What inevitably happens is that a competitor will charge a lower price for equal—or often greater—service, and your firm will no longer be competitive in the modern market.With the push of automation and ongoing efficiency, a firm focused solely on the billable hour is one that seemingly continues to struggle in today’s marketplace.Now, I’m not saying to move entirely to a value-based, zero- timesheet practice tomorrow; absolutely not. Always think strategically about your pricing model before jumping ship. Instead, I’ll walk you through the alternatives you can choose for your firm, plus the benefits you will see. You will also learn how to move your current and new clients into this pricing model without running into issues.Price. It’s such an emotional and psychological topic for many business owners. Price has many elements, but before we dive into tactics, let’s dive into one thing first: mindsetMindset
If you do not value the service you provide to your clients and understand the ROI of the services you offer, it’s extremely hard to make price increases or transitions.Or if you do not believe little ole’ me can ever demand a higher price point, simply because you believe you’re not supposed to, then these pricing strategies will not make an impact.In fact, while things like market positioning, price positioning, proper sales consulting, and marketing all go into demanding a higher fee, many firm owners never start the process. Or nearly as bad, they take one small action, fail, and then never return.So before we dive into price, let’s complete the following exercise:- If you and all other accounting firms were to go under today, and individuals and small business owners had to do their accounting themselves, what would happen? What would happen to their time? Their cash flow? Their profitability? Their sanity?
- For those firms who do charge more, what allows them to ask for more? Note: you cannot point to location, years in business, size of staff, office type, etc. The question is: how are they perceived by a market that expects either a higher price or different pricing model?